Valuations dive in pvt markets as VCS count cash

“Six months ago, founders were keeping value exploration at a later stage with a convertible round. But now, they prefer a clean down round," said Kashyap Chanchani, managing partner of The Rainmaker Group, a homegrown investment bank focused on new-age companies.

- Ranjani Raghavan, Sneha Shah

In a convertible round, startups borrow against bonds that are converted to equity in the future at a valuation that is decided later, whereas, in down rounds, they issue shares at valuations lower than the last round.

This year, Wakefit, which sells mattresses and other sleep solutions, raised fresh capital at a valuation of less than $300 million, down from $380 million in November 2021.

“The dollar (figure) may not give the right picture as the currencies (USD and INR) have moved in this period. If you look at our INR status, the Series C post-money and Series D post-money valuation are very close to each other—so it is at a flattish valuation," a company spokesperson at Wakefit said. The company added that its mature businesses were clocking earnings before interest, tax and amortization (Ebitda) positive, which had helped it raise Series D capital in a tough environment.

According to Chanchani, boards are asking founders to accept whatever capital is available, even at a lower valuation. “Valuations in private markets have corrected in line with how the stocks of broader listed peers have performed. There has been a 40-60% drop," he added, declining to name companies.

Several unicorns in consumer tech, edtech and health tech actively looking for capital are still looking for investors even at a down round, four investors tracking the ecosystem said on condition of anonymity.